Samsung profits drop for first time in two years, tablet and phone demand still strong

Samsung’s Q4 2013 financial report reveals a profit loss for the first time in two years, despite strong demand for its smartphones and tablets.

The detail Q4 2013 report show an operating profit decline for the quarter, the first reported by the company in two years, which could be of concern to investors.

Of course, 8.3 trillion won (£4.7 billion) operating profit is still huge, and is only slightly lower than the 8.84 trillion won (£4.98 billion) figure posted for the same period the year before.

“Earnings will remain stagnant this year as the explosive growth of the past two to three years seems to have ended,” said Lee Sun Tae, a Korean-based analyst at NH Investment and Securities. “Although the lower-end smartphone market will continue to grow, the scale of profit from that segment doesn’t compare to the high-end market so the growth seems limited.”

However, it could suggest growth is slowing in Samsung’s smartphone and tablet business.

Samsung has been celebrating its mobile division though, saying tablet sales doubled from last year and people are more interested in their product range than ever before.

Apparently, this decline in operating profit is due to a £448 million one-off payment to employees to celebrate the 20th anniversary of the company’s “New Management Initiative”. Plus a stronger Korean won meant the company lost out on 700 billion won (£389 million).

“Samsung’s two major challenges for 2014 are to maintain its mobile-phone leadership in China and the US, while simultaneously growing its tablet business quickly enough to knock Apple iPad from its perch,” said Neil Mawston, an executive director at Strategy Analytics. “A flood of Asian rivals from China and India, such as Lenovo, as well as a product refresh from Apple, are pressuring Samsung.”